Entrepreneurial innovations and taxation
b"In many countries entrepreneurship is promoted through tax reductions for small businesses and by various government support schemes. We analyze the effects of such\\npolicies to subsidize small businesses in a setting where both the risk-return characteristics of the selected innovation project and the mode of commercialization chosen\\nby entrepreneurs (market entry versus sale to an incumbent firm) are endogenous. We show that government programs to support small businesses foster market entry by\\nentrepreneurs but, at the same time, give an incentive to choose low risk projects, due to the existence of limited loss o\\xaeset provisions. This points to a basic trade-off be-\\ntween the goals of raising competition in technology-intensive markets and the desire of governments to foster risky `breakthrough' innovations."